March 22, 2006

Blacks and Immigrants to get hardest by real estate bust due to percent of income paid towards housing

Right after the post yesterday on my prediction of an increase in the crime rate, addressing the socio-economic issues of our black, white and Hispanic classes with the housing meltdown, this report from Boston.

Economics folks are destiny. Not genetics. Not skin color. Simple personal economics.

And when you heard Bush, among others of course, pumping home ownership as the American Dream a year ago with the "ownership society", thus encouraging the houseless to get housed (or hosed), it was the last sucker in, and unfortunately, cruely, that was disproportionately the lowest socioeconomic rung - made up disproportionately of minorities.

The rich white guy telling the poor Blacks and Hispanics to buy at the top. Maybe Kanye West had a point there..

Homeowners stretched perilously - More than a quarter in Boston spend at least half their pay on housing. Blacks are hit hard.

If the nation's real estate boom collapses, its first victims may well be low-income minorities and immigrants in a big US city like Boston.

That is the picture emerging here as foreclosures rise and the housing prices falter. More than one-quarter of Boston's mortgage-holders appear to be stretched thin financially, spending at least half their income on housing, according to an analysis of census figures. That's more than twice the national average and the highest of any major city except Miami.

The trend is especially worrisome, the analysis shows, because these vulnerable homeowners tend to be minorities and immigrants who, experts say, often hold the riskiest mortgage loans.

The threat has implications not only for Boston, whose population would have shrunk without an influx of immigrants, but for the US.

The pressure appears greatest for minorities and immigrants, says Dr. Sum, who conducted the census analysis. Statewide, 33 percent of blacks with mortgages were paying half or more of their gross income toward monthly housing costs, and 29 percent of Hispanics were, more than double the average, he says. And 22 percent of foreign-born fell into the category. Such factors could not be broken down for Boston because the census data are limited.

66 comments:

Anonymous said...

Please don’t give this idea any validity! Most Blacks, Hispanics … and Whites are not victims!

Anonymous said...

wow, what a stupid theory. Kanye is right? Please stay in the UK

Bake McBride said...

There is nothing wrong with pushing an ownership society....IF you are in a position to be an owner.

"Statewide, 33 percent of blacks with mortgages were paying half or more of their gross income toward monthly housing costs, and 29 percent of Hispanics were, more than double the average"

Who's fault is that?? How about being responsible for your own actions??

Marvin Gardens said...

The three posts above have a really oversimplified view of real estate and financing. Large percentages of people don't just stumble into getting in over their head financially. Buying real estate is not like buying merchandise. They were agressively pursued by salesmen who most likely sold them a financial product packaged as highly lucrative and within the context of "the American Dream." You don't really think a lot of these hard-working folk of average intelligence fully understood what they were getting into, do you? Don't you think a lot of people have been misled?

Anonymous said...

Well it is kinda true.I live on Long Island ,NY. I'm white and I cannot afford a house in a bad black neighborhood. so WTF is wrong in this country??

Anonymous said...

Od course, they've been misled. I saw a real estate commercial last night in which a wife says she really wants a particular house, and the realtor says she can make it happen, even though the husband is dubious. Creative financing. Right? The real estate industry is hugely responsible for tricking people into buying beyond their means.

However, the other writers are also correct. Humans are responsible for their own fates, and if they are too stupid to ask questions or get answers, then what are we supposed to do? We can't protect everyone from those who would abuse and exploit them.

When all is said and done, many realtors, investment companies, etc. should be prosecuted, but the "victims" must also be held accountable. Nothing could be worse that having the federal government jump in to bail them all out. There is not enough available money on Earth.

Bush is an idiot for encouraging fake home ownership, but he's also a patsy for Big Business, and clearly hasn't a clue as to what's going on. I have no doubt he actually beleives what he's been told to say. He's another fool being used. Should we rush to his rescue, too? Should we not hold him accountable for not asking questions and getting answers? It doesn't matter if someone is rich or poor: Stupid is stupid is stupid.

Bake McBride said...

"Marvin Gardens said....You don't really think a lot of these hard-working folk of average intelligence fully understood what they were getting into, do you?"

Yes I do.....How hard is to figure out that if I make X and have to pay Y for my home I'm left with Z??

Do I think some lenders were not honest....I sure do. Do I think some realators pushed them to homes that were above their budget...You bet

The problem I have is if your willing to sign off on a debt for hundreds of thousands of dollars it is incumbent on the borrower to do their research. My Grand Mother from Italy knew this and she had no formal education and couldn't speak the language.

Anonymous said...

Anonymous said

"They were agressively pursued by salesmen who most likely sold them a financial product packaged as highly lucrative and within the context of "the American Dream."

Maybe “they” are not as stupid as you think!

You’re comments are condescending and patronizing!

Anonymous said...

What your Million dollar could buy in NORTH DOVER, TOMS RIVER, NEW JERSEY 08755

How the heck this suburb had such Luxurious homes when in fact Hospitals supporting the neighborhood is suffering from Medicare reimbursement losses.... Can this Bubble be supported for a longer time period ????

Just www.ZILLOW.com North Dover area of Toms River, NJ 08755 !!!

Marvin Gardens said...

"However, the other writers are also correct. Humans are responsible for their own fates, and if they are too stupid to ask questions or get answers, then what are we supposed to do? We can't protect everyone from those who would abuse and exploit them."

I think it's very immoral to take advantage of people's emotions when selling them a large, complex financial product. It's just plain wrong.

Sometimes people even take advantage of thier religious beliefs. When we bought our first house and were trepidatious about the financing the mortgage broker told us it was God's money (implying that everything would come out alright somehow).

I believe/hope that we will come out ahead in the end, but certainly know it's a mix of good judgement AND factors beyond my contol. I went over all the mortgage documents with our lawyer at the closing (now 5 mortgages later), but I still feel I made a leap of faith and hope I'm not getting screwed somehow.

The original post basically states large percentages of people are getting screwed by the real estate bubble. I think that's wrong.

keith said...

I'd like a Bush defender to defend Bush's incessant promoting of buying a first home a year ago to folks who didn't own a home, when we were obviously "frothy" and buying then (at the top) would equal financial doom for the last ones in (who would also need an interest-only no-down ARM to get in)

Either corruption (real estate donors), incompetence (too stupid to realize his advice was bad) or evil ("george bush hates black people") in my book.

I'd believe it's just simple (and now expected) incompetence - too stupid to realize his advice was bad, no matter how well intentioned it was.

Marvin Gardens said...

I'm the only one here saying "they" AREN'T stupid. I'm saying average folks are easy targets for unethical mortgage salesmen.

You can say all the standard stuff like,

"Caveat Emptor!"
and
"A fool and his money are soon parted."

and other ol'timey words of wisdom,

but I think it's more complicated than that.

Anonymous said...

Keith said...
"I'd like a Bush defender to defend Bush's"
-----------------------------------
Keith, why are you talking about this bullsh_t again? Despite the fact that I can no longer support W, that doesn’t mean I want to have that debate with someone who never supported him.

We just don’t care!

Anonymous said...

bake mcbride,

I would bet your grandmother from Italy wasn't encouraged to commit 50%+ of her gross income on an ARM with zero down for an overvalued house in a frenzied market.

Anonymous said...

WMDs, We Will be Greeted as Liberators, Iraqi oil will pay for reconstruction, Buy a house, I only had 1 beer.
Do you believe anything they say?

Bake McBride said...

"I would bet your grandmother from Italy wasn't encouraged to commit 50%+ of her gross income on an ARM with zero down for an overvalued house in a frenzied market"

Nope...she wasn't "smart" enough for that. She did a loan she could understand with terms she could afford. What a concept...know what you're signing and know that you can afford it.

Anonymous said...

Keith said, with regard to Bush:

"I'd believe it's just simple (and now expected) incompetence - too stupid to realize his advice was bad, no matter how well intentioned it was."

I agree. Bush is not evil, and he certainly is not bigoted. But, he is dumb as dirt.

Has anyone looked to see what, if anything, the NAR contributed to his campaigns? His comments about home ownership sound as if they could have been written by Lereah himself. Then again, the industries making the loans may be the masters pulling his puppet strings.

In any even, Bush's ecstasy over fake home ownership was no worse than Clinton's ecstasy over the dot-com bubble. Every president plays up the so called prosperity "created" by his administration.

We need stronger consumer protection laws, absolutely, but we need smarter, more demanding citizens as well.

I think it highly suggestive that Dell Computers, a company with over SEVENTEEN THOUSAND irate-customer complaints filed with the local BBB (which is hard to find, and whose complaint protocol is very difficult and time-consuming), and hundreds of customer complains filed on ripoffreport.com, is still operating with apparent impunity in Texas. Even the BBB makes apologies (Dell is a huge local employer, and a faithful BBB member).

panicearly said...

its not just poor people that fall for these scams. in my neighborhood there are a lot of uppermiddle class people who are way over leveraged. Its just that people should not be preyed upon.
but thats what con men do and for them its just business to prey on people.
its very american these days. fuck the phone companies over bill my parents all the time, they are old and are not agressive enough on the phone to defend themselves. I have to look over their bills all the time. wolves at the door

Bake McBride said...

"In any even, Bush's ecstasy over fake home ownership was no worse than Clinton's ecstasy over the dot-com bubble. Every president plays up the so called prosperity "created" by his administration."

What did you want either to say?? No one knows the top or bottom of a market. I would have never guessed that housing would have been so strong in 2005.

Politicians try to take the credit when large economic sectors do well....Bush didn't tell anyone to do a 0 down loan on a home they couldn't afford nor did Clinton tell anyone to blow their retirment savings on Pets.com

Anonymous said...

"Politicians try to take the credit when large economic sectors do well....Bush didn't tell anyone to do a 0 down loan on a home they couldn't afford nor did Clinton tell anyone to blow their retirment savings on Pets.com"

No, but Bush and Clinton sure did bask in the glory of a mass delusion, didn't they? Bush and his bunch are still basking. And don't forget, Gore actually claimed to have invented the Internet, taking the ultimate credit for the dot-com gold rush. They are all horrible human beings.

Marvin Gardens said...

bake mcbride,

I wish life (and mortgage transactions) were that simple. Do you take full responsibility for everything in your life?

I consider myself prudent AND fortunate to have come out of this wild ride unscathed.

I observe a lot of average people around me who are getting into real estate "even as we speak." I'm sure they're trying their darndest to figure it all out and make sure they don't screw up. I doubt they're taking it lightly.

We aren't living in the world of your Italian grandmother anymore.

Anonymous said...

to the guy with the saintly, old, italian gramma...

How would you feel if she were taken by an unethical "real estate professional" today who preys upon the elderly???

Anonymous said...

All that subprime lending DID prey on the poor - the question is where were the bank regulators in all this? Remember, in Phoenix they started giving mortgages to illegals.

The poor will vote accordingly in the next election.

Bake McBride said...

"How would you feel if she were taken by an unethical "real estate professional" today who preys upon the elderly???"

I'm not saying that some people didn't get screwed by unscrupulous sales people....but that is not what has driven this market. Greed, and every idiot who thinks that real estate is a sure bet has driven this market to insane levels.

They are the same people that gambled on the tech boom when it "couldn't go down".

Greed and the lure of easy money has driven this market....and there will be plenty of people burnt and looking for someone to blame. In 98.9% of the cases...they should look in the mirror.

Anonymous said...

Okay Keith,

I'll defend Bush's goal to increase home ownership in general, and especially among the minorities and the poor. BTW, it's not a Bush-only idea. Both parties have pushed this for a long, long, time. It disgusts me that everything negative in your world is directly attributed to Bush. Will you blame him too if your wife leaves you?

Home ownership (or any ownership for that matter) brings folks into the fold. If you rent a house and your neighbors turn theirs into a crack house, you may be inclined to rent somewhere else when your lease expires. If you own a house in the same situation, you'll work with the other neighbors and local police to get the crack house shut down.

That is just the most basic example. The principle applies to schools, hospitals, local government, environment, etc. When you have a stake in your neighborhood, community, country, you naturally become an advocate. Why is this a bad thing for minorities or the poor?

We can debate the bubble. We can say it might not be a good thing to buy this year. What does not make sense is to confuse this bubble discussion with home ownership. Home ownership is a net positive in our society. Not a negative.

Anon in Austin,TX

keith said...

encouraging people to buy when renting was 30% of the cost of owning will be seen as the most damaging economic policy ever promoted by a sitting US president in the history of the US.

If I was president at the time, my directive would have been for working people to manage their hard earned money as best as they could, and not buy overpriced speculative real estate, instead waiting until prices became sane again and were linked to rental income in some form.

The reprecussions of this disaster will last for generations. But again, so will Iraq, so will the Social Security ponzi scheme and so will the inability to address our debt, deficit or trade imbalance.

Marvin Gardens said...

Bake,

I doubt a young couple with their first child sitting across from the mortgage broker asking "how much they can afford" could be considered greedy. They think it's their time to buy a house. They may be black. They may be white. They may be elderly. There are a lot of very average folks working their butts off in pusuit of their little piece of the pie who are getting taken by unethical salesmen.

Anonymous said...

In my neighborhood, renting is no huge bargain over owning. If it was true that I could save 30% by renting my home, I would.

So what is your point? Are you against minorities and the poor owning homes? Why wouldn't you want to have them a stake in my community, my country? I certainly want them to.

Anon in Austin,TX

Bake McBride said...

"Marvin Gardens said... I doubt a young couple with their first child sitting across from the mortgage broker asking "how much they can afford" could be considered greedy. They think it's their time to buy a house. They may be black. They may be white. They may be elderly. There are a lot of very average folks working their butts off in pusuit of their little piece of the pie who are getting taken by unethical salesmen"

I know I sound cruel, since there are good people that were taken advantage of....but no one is going to know your situation in life...no matter how ethical the sales person is:

Too many people fail to ask the basic questions:

How much do I make per month?
What can I afford to pay per month?... That is a big difference then asking how much "HOUSE" can I afford!!

How stable is my job?
Do I have any other money set aside after buying this home?

This responsibility can't be put on the sales person. Look at all these "risky" loans that were written a few years ago...most people that took out these products 4 years ago did very well. Do we heap praise on the sales person for getting them those loans??

Does that mean these loans are right for everyone...No. They should be made available to everyone that qualifies...but the final say belongs to the borrower and the risks they are willing to take.

TJ said...

Truly it was the white trash and poor minorites that got suckered in the most to buy at the top with zero down, interest only, and ARM. Real estate agents have become much more like car dealers.

globethistle.blogspot.com

TJ said...

It's sad that this push to buy was not only from within the industry, but also from the administration. Greenspan with his advice and Bush with his "Ownership Society". There will be plenty of blame to go around.

globethistle.blogspot.com

Anonymous said...

encouraging people to buy when renting was 30% of the cost of owning will be seen as the most damaging economic policy ever promoted by a sitting US president in the history of the US.

Wrong, wrong, wrong. There is nothing wrong with Bush saying that owning your own home is good thing or move. Over the long term, it is. He cant predict what the market will do, neither can we. Buying a house, and living in it for 25+ years is a great thing. Lay off the left wing, bitter nonsense.

Anonymous said...

So what is your point? Are you against minorities and the poor owning homes? Why wouldn't you want to have them a stake in my community, my country? I certainly want them to.

Keith's point, because he is angry, and anti-free market. Why do all you lefties care so much about who bought at the "top" and how? People are big boys, and can live with their decisions. What about the plumber with 3 kids who goes to Best Buy and buys a $5,000 LCD TV, only to have it sell for 35% less next year? Keith, you should "save" him from his bad decision. Or...maybe it is his decision to make, and let free markets work...they always do.

Marvin Gardens said...

bake,

It's just the opposite.

The mortgage guys/real estate agents are doing everything they can to know everything about your situation so they can squeeze every penny out of you. You don't get it. A young couple with their first child want desperately to buy a house. That guy across the desk with the tie looks like someone they can trust. Banks and real estate agents don't yet have the same ambiance as used car salesmen, so that young couple trusts them. The mortgage broker loves the fact that the buyers are all starry-eyed about buying their first house, and they play with that trust.

Bake McBride said...

"A young couple with their first child want desperately to buy a house...."

That's the problem....their "desperation" to purchase a home is jading their decision process. People want everything now....forget about saving until they are in a better position to purchase....it's now, now, now.

Mortgage guys job is to get a customer as many loan options as they qualify for

Real Estate guys job is to find a customer a home they like and will qualify for.

Customer--has to decide what option is best for them...or to walk away and try again at another time.

If you have 200k to put down on a home should you go out and buy a million dollar home? I can't answer that since I don't know the position the buyer is in. Maybe they feel Real Estate is still a great investment and want to get the max house they can qualify for....Why should anyone stop them? It's the decion they made with their money.

stacy said...

"It's the buyers responsibility"

I spent years selling large ticket capital equipment to corporations and it is a piece of cake to play the numbers to make them sound as advantageous to a buyer as possible.

If I can spin the Purchasing manager of a corporation in a non emotional purchase where the bottom line is everything, think how easy it is to do it to a couple desparate to get into a home.

You just focus on the immediate bottom line - monthly payment and talk up increase in property values, potential increase in wages, inflation yada yada yada. And someone who is completly unscrupulous lies - they don't tell them about potential increases (or they minimise them) and some people tell buyers that certain figures - taxes for instance are included when they are not.

Anonymous said...

"We can debate the bubble. We can say it might not be a good thing to buy this year. What does not make sense is to confuse this bubble discussion with home ownership. Home ownership is a net positive in our society. Not a negative."

Ownership is a net positive but I think that everybody here can identify situations where folks would be ill-advised to buy, irrespective of race. Loosened lending standards have allowed people who are not financially stable to buy homes. This activity has fueled the bubble.

Now, I know someone will respond and say that it is elitist/biggoted to suggest that some folks should not buy a home. That is the standard line you'll here from the subprime crowd whenever this point is brought up. Those who possess common sense and a good grasp of home finances know that is a load of bull$hit. The lesser lending standards and growth of subprime lending has been the gasoline added to the fire of low interest rates.

Anonymous said...

This RE bubble is the biggest scam in history that the riches pull on the middle and poor class. Maybe a few middle class got in at right time and right place made some money but in reality they made the riches even richer. What else they scam us on gas price, healthcare cost then RE price. Next scam will be foods and water.

Anonymous said...

A conflict of interest begins at its source. Federal Regulators look closely at banks to make sure they're "lending enough" to minorities and low income areas. This causes banks to offer additional bonuses to loan officers, to "get" minorities to sign up.

Grinch34 said...

The major problem is the lack of financing regulations. Back when my sister bought her home, she had to have a least 10% down and no debt to secure a loan for a 60,000 dollar home. Today you do not have to have any down payment and may even have bankrupcy and get a loan for 10 times that amount. I do believe that people should be held accountable, but if the law is was not changed to allow anybody to get a loan under any circumstance, then there would not be a housing bubble. This bubble was by design so a few people at the top could get rich and the common person is bailing the government out when things crash.

Anonymous said...

Sigh, Keith dissapointed us again...

renting in mass said...

I was a little surprised to read this. I do believe that there is a housing bubble in Massachusetts, but I thought that people here were more conservative financially than people in California. But it just refers to mortgage payments, it doesn't say anything about the type of mortgages. Perhaps this is the case because we have fewer I/O loans. But regardless, it will be ugly as the downside of the boom plays out.

Anonymous said...

why don't all you anonymous start getting user names or pen names and stop being hiding pussies?

Anonymous said...

The ability to post anonymously is a great throwback to the 190s when anyone could post anonymously on those old 300 baud bulleton boards.

UseNet was cool for a while, until SPAM killed itt. I never bother with it anymore.

moman said...

I agree - just post with a pen name like I do

Anonymous said...

"This RE bubble is the biggest scam in history that the riches pull on the middle and poor class. Maybe a few middle class got in at right time and right place made some money but in reality they made the riches even richer. What else they scam us on gas price, healthcare cost then RE price. Next scam will be foods and water. "

Another idiot, bitter, loser liberal, socialist moron.

Boston-Real-Estate-Watch said...

I blame the banks for allowing unqualified idividuals to obtain loans. I feel sorry for indivuals who will loose their homes.

boston condos

Anonymous said...

Sorry, but the poor, by definition , don't own homes. If they did, they wouldn't be poor, especially after five years of double digit appreciation. This blogger's statement is up there with the silliest I've ever seen. The poor RENT, which the blogger (who has no poor firends) apparently is unaware. He is also unware that the renters have profitted enormously from the real estate bubble and bust - rents , in real terms, are at an alltime low. In other words, the poor have
done far better than the rest because of the bust, which has produced an avalanche of rental properties. I'm afraid the blogger will have to think up another reason why the poor are not well off. Perhaps it might dawn on him that
their lack of money might qualify them as being not well off. It's too bad the poor have such confused sympathetic friends. They can't get a break.

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The average home is currently on the for about 4 months before it goes to contract. Around 15% of initial real estate contracts never make it to a successful closing ... something goes wrong, and the frustrated seller puts the home back on the real estate market .

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